C. W. MACKIE & CO., LTD. V. TRANSLANKA INVESTMENTS LTD

002-SLLR-SLLR-1995-2-C.-W.-MACKIE-CO.-LTD.-V.-TRANSLANKA-INVESTMENTS-LTD.pdf


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Sri Lanka Law Reports
[1995] 2 Sri L.R.
C. W. MACKIE & CO.. LTD.
v.TRANSLANKA INVESTMENTS LTD.
COURT OF APPEALSARATH SILVA, J. (P/CA)
RANARAJA, J.
C.A. REVISION 590/94
A./L.A. 205/94
C. COLOMBO 34941/MSFEBRUARY 20,1995.
Civil Procedure – Civil Procedure Code Cap. L III – Leave to defend conditionallyor unconditionally – Debt Recovery (Special Provisions) Act, No. 2 of 1990, S. 25- Civil Procedure Code S. 704 – Bills of Exchange Ordinance, SS. 27, 30, 75 and92 – Notice of dishonour – Sustainable defence – Good faith.
The plaintiff-petitioner instituted action in terms of Cap. L III of the Civil ProcedureCode for the recovery of Rs. 69,837,650/- on 93 causes of action based on 93cheques. The defendant-respondent sought and obtained leave to defendunconditionally. The plaintiff seeks to revise that Order.
Held:
Under S. 704, court is required to consider the Petition and Affidavit togetherwith any documents filed and decide whether there is a prima facie sustainabledefence.
Even though there appears to be a defence, if Court is doubtful of itsgenuineness, the defendant may be ordered to give security.
There is no obligation on the plaintiff to produce any documents in support ofthe averments regarding Notice of Dishonour, at the time of filing of plaint.
If no adequate funds are in the Bank Account to meet the cheque, at the timeit was drawn, it is an offence under Section 25 of Act 2 of 1990.
Quare:
Whether non-compliance with Section 48 of the Bills of Exchange Ordinance couldbe construed now as a sustainable defence, in view of S. 25 of Act 2 of 1990.
It is not necessary to give Notice of dishonour to a person who draws acheque without adequate funds – Section 75 of the Bills of Exchange Ordinance?
Where Court feels a reasonable doubt exists as to the honesty of the defence,it is entitled to order a defendent to appear and defend – conditionally.
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C. W. Mackie & Co., Ltd. v.
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Cases referred to:
De Silva v. De Silva 49 N.L.R. 219.
Wallingford v. the Mutual Society (1880) 5 App. Cas. 704.
APPLICATION for Revision of the order of the District Court of Colombo.
Romesh De Silva, P.C. with H. Amarasekerator petitioner.
S. Sivarasa, P.C. with K De Alwisfor respondent.
Cur. adv. vult.
March 10, 1995.
RANARAJA, J.
The plaintiff-petitioner, (Petitioner) instituted action against thedefendant-ref'ondent, (respondent) in terms of Chapter L III of theCivil Procedure Code, for the recovery of a sum of Rs. 69,837,650/-on ninety-three causes of action, based on ninety-three cheques. Onsummons in form 19 being served, the respondent applied to Courtby way of petition and affidavit for leave to appear and defend theaction. Court allowed an application by both parties to have thematter decided on written submissions. On 29.7.94, Court madeorder permitting the respondent to appear and defend the actionunconditionally. This application in revision is from that order.
Section 704 of the Civil Procedure Code Provides:
"The defendant shall not be required, as a condition of his beingallowed to appear and defend, to pay into Court the summentioned in the summons, or to give security therefor, unlessthe Court thinks his defence not to be prima facie sustainable orfeels reasonable doubt as to its good faith."
The Court is required by this section, to consider the petition andaffidavit together with any documents filed, and decide whether thedefendant has a prima facie sustainable defence. Even though thereappears to be such a defence, if Court is doubtful of its genuineness,the defendant may be ordered to give security before beingpermitted to appear and defend. At this stage Court is not calledupon to inquire into the merits of the cases of either party.
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The petitioner complains that the learned District Judge hasmisdirected himself in law when he held that no notice of dishonourhad been given by the petitioner to the respondent, on the basis thatthe petitioner had failed to provide any proof in support of that fact.The learned Judge has commented that the petitioner had beenvague in his pleadings on the question of notice of dishonour. What isrequired of a plaintiff under the provisions of Chapter Llll, is that heshould state that he has given notice of dishonour or that he wasexcused from doing so. Whether the allegation is true or false will bematter of evidence at the trial proper. There is no obligation on theplaintiff to produce any documents in support of the averment ofnotice of dishonour at the time of filing the plaint. In any event, on theface of the cheques which have been produced with the plaint thereis no doubt that ninety-three cheques have been returned with thefollowing endorsements: "Exceeds Arrangements" (51), “NotArranged for" (20), "Refer to drawer” (12), “Account Closed" (6),“Effects not Realised" (4).
Paragraph 10(a) of the petition filed in the District Court by therespondent states:
“Pursuant to the agreement between the parties the defendant-petitioner issued cheques to the plaintiff-respondent to coverthe value of the plaintiff-respondent's goods sold by thedefendant petitioner to third persons, which cheques were to beheld by the plaintiff-respondent and presented for payment onlyafter the defendant-petitioner had received payment and uponthe defendant-petitioner intimating that fact to the plaintiff-respondent."
The respondent has thereby admitted the receipt of the sugar fromthe petitioner and that the ninety-three cheques were issued to coverthe value therefor, while there were no adequate funds in its bankaccounts at the time the cheques were drawn, to the value of thosecheques. Section 25 of the Debt Recovery (Special Provisions) ActNo. 2 of 1990 makes such conduct on the part of a drawer of acheque an offence. In the circumstances, the question arises whethernon-compliance of Section 48 of the Bills of Exchange Ordinance,which is an enactment prior to the Debt Recovery (Special Provisions)
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Act, could now be strictly construed as a sustainable defence, onthe principle that a person should not be permitted to benefit by hisown crimes. In this context, it is also relevant to consider Section 75of the Bills of Exchange Ordinance, which states:
"The duty and authority of a banker to pay a cheque drawn onhim by his customer are determined by:
countermand of payment
notice of customer’s death.
This Section is identical to Section 75 of the Bills of Exchange Actof 1882 of the United Kingdom. Byles on Bills of Exchange (26th Ed:at Pg. 293) commenting on that Section states:
“The drawer of a cheque is, equally with the drawer of a bill,entitled to notice of dishonour unless such notice is excused orwaived; but notice will not be necessary when the dishonour isdue, as is usually the case, to absence of effects in the bankershands or when payment has been countermanded."
Thus it is seen, a person who draws a cheque without sufficientfunds in his bank account to meet the cheques drawn, need not begiven notice of dishonour, as such person would in any event beaware at the time the cheques are issued, that the bank would nothonour them. In these circumstances, the learned District Judge has,it appears, prematurely decided the question of the absence ofnotice of dishonour in the respondent’s favour.
The petitioner submits that the learned District Judge has notconsidered the fact that the respondent had received sugar to the fullvalue of the cheques. The respondent on the other hand asserts thatCourt was correct in holding that the delay in the petitionerpresenting the cheques after a lapse of time was due to anarrangement between the parties, namely, to present the cheques tothe bank, upon ascertaining from the respondent whether thirdparties to whom the sugar was distributed by the respondent, hadmade payments for the supplies.
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Section 27 of the Bills of Exchange Ordinance states:
"Valuable consideration for a bill may be constituted by:
any consideration which by law of England is sufficient tosupport a simple contract:
an antecedent debt or liability, such as a debt or liability isdeemed valuable consideration whether the bill is payable ondemand or at a future date.”
This Section is again similar to section 27(1) of the Bills ofExchange Act of the United Kingdom. Byles on Bills of Exchange (atPg:2 243) referring to this Section says:
“If a man seeks to enforce a simple contract he must, inpleading, aver that it was made on good consideration, andmust substantiate that allegation by proof. But to this rule billsand notes are an exception. It is never necessary to averconsideration for any engagement on a bill or note, or to provethe existence of such consideration, unless a presumptionagainst it is raised by evidence of the adverse party, or unless itappears that injustice will be done to the defendant, or the lawviolated, if the plaintiff recovers. In the case of simple contractsthe law presumes that there was no consideration tillconsideration appears; in the case of contracts on bills or notes,a consideration is presumed till the contrary appears or at leastappears probable."
This conclusion necessarily follows from Section 30 of the Bills ofExchange Ordinance which states:
“(1) Every party whose signature appears on a bill is primafacie deemed to have become a party thereto for value.
(2) Every holder of a bill is prima facie deemed to be a holderin due course, but if in an action on a bill it is admitted orproved that the acceptance, issue, or subsequent negotiation ofa bill is affected with fraud, duress or force and fear, or illegality,the burden of proof is shifted unless and until the holder proves
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that subsequent to the alleged fraud or illegality value has ingood faith been given for the bill."
It is clear the learned District Judge could have concluded that thepresumption in favour of the petitioner was rebutted, if only therespondent established that there was an agreement between theparties on the mode of presenting the cheques for realisation. Thepresumption in favour of the petitioner on consideration cannot belightly rebutted. The burden lay on the respondent to do so, oncogent evidence, which at any rate was not available to the learnedJudge at the time he made the order. Such evidence could be ledonly at the trial stage. Thus it was incorrect to hold that therespondent had a sustainable defence on the lack of consideration,on the basis of the alleged agreement between the parties, at thetime it sought leave to appear and defend.
It is submitted on behalf of the petitioner that in any event, thedefence adduced by the respondent lacks good faith and is in fact asham, which disentitles it from being permitted to appear and defendunconditionally. In this context, it is relevant to advert to what the Billsof Exchange Ordinance itself means by the words “good faith".Section 92 defines “good faith” as “what is in fact done honestly.”Where Court feels a reasonable doubt exists as to the honesty of thedefence, it is entitled to order a defendant to appear and defend,only on condition of depositing in Court the sum of money for whichhe is being sued. Howard, C.J. in De Silva v. De Silva(1), quotes LordBlackburn, (in Wallingford v. The Mutual Society)(2) where he explainsthus:
“It is not enough to say “I owe nothing", he must satisfy the judgethat there is reasonable ground for saying so. It is difficult todefine it, but you must give such an extent of definite facts . . .as to satisfy the judge that those are facts which make itreasonable that you should be allowed to raise that defence."
What is the basis of the respondent’s defence ? Simply that thepersons to whom it sold the sugar had failed to pay on time.Admittedly, the respondent has not paid one cent of the amountclaimed by the petitioner. Nor is there even a bare averment in the
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petition filed by the respondent, that it had made attemptsunsuccessfully to recover the monies due from the persons to whomit sold the sugar. Is it then possible in the circumstances, to say, thatCourt was satisfied or felt that the defence raised by the respondentwas honest or bona fide ?With respect, I think not. The respondent’sdefence is nothing but a sham.
For the reasons given, the order of the learned District Judgedated 29.7.94 is set aside. The respondent is directed to deposit thefull sum claimed by the petitioner in Court as a condition precedent,before it is permitted to appear and defend. This sum will bedeposited on or before 28.4.95, failing which decree will be enteredfor the total sum claimed by the petitioner.
Counsel for both parties agreed that the order in this applicationwill bind them in the connected leave to appeal application No. CALA205/94. They also agreed that this order will bind the parties in therevision application No. CA 684/94 and the connected leave toappeal application No. CALA 234/94 from the order dated 16.9.94 inDC Colombo case No. 34953/MS, against the same respondent,where the sum claimed is Rs. 15,082,500/- with interest.
The application is therefore allowed with costs.
S.N. SILVA, J. -1 agree.
Application allowed.